SSPO Backgrounder – Click Here
The Root of Stelco’s Pension
Plan Problem – Click
Here
______________________________________________________________
Ontario Provincial Government Culpability – Click
Here
To assist with the current
Stelco Pensioner problem we are making requests of the Ontario Provincial
Government – Click Here
______________________________________________________________
We are recommending that the Federal Government take
actions to assist Stelco pensioners – Click Here
______________________________________________________________
Municipal Governments have a stake in
the outcome – Click
Here
We recommend that Municipal Governments and their
representatives take the actions to assist Stelco, its employees and pensioners
– Click Here
There are
currently about 4100 Stelco Salaried Pensioners. These people are the clerks,
secretaries, accountants, supervisors, etc. who have traditionally not had
representation in the workplace and are overlooked by politicians and the media
in the Stelco crisis. It is for this reason that we have organized and are
meeting with you to request certain actions that we believe are needed to
protect our pensions and benefits.
In the current Stelco crisis
the salaried pensioners are different from other Stelco pensioners in that we
contributed to the plan by monthly payroll deduction until 1987 when Stelco
changed the plan to non-contributory. We also differ in that the Stelco Salary
Pension Plans are not indexed to the cost-of-living and most pensioners have
never had a pension increase. Our pensions are not large. At the end of 2002
the core members of the plans had a weighted average annual pension of $19,387,
so any decrease will have serious implications.
Also under threat is our
Benefits Package, which includes coverage for medical, dental, drugs and life
insurance. Many pensioners are very dependent on these benefits and any
reductions will have a detrimental effect on them and their families. Most
never purchased additional life insurance and some cancelled policies because
Stelco provided this benefit. The purchase of such insurance at an advanced age
would be cost prohibitive if available at all.
In the case of companies
reorganizing under CCAA, we believe pensioners should not have their pensions
or benefits reduced. Pensioners are the most vulnerable people amongst the
creditors. It is highly unlikely that at this stage of their lives that they
can find employment to meaningfully supplement their income. Pensioners are
also under a stricter budget than a working person. The Stelco Salary Pensions
have already fallen behind because of inflation and due to their age,
pensioners and their spouses are more likely to need their medical benefits.
The root of
Stelco’s pension plan problem derives from Regulation 5.1 of the Ontario
Pension Benefits Act also known as the ‘Too Big to Fail’ regulation. This 1992
regulation allowed companies that had pension funds in excess of $500 million
to elect to be treated as a “qualifying plan”. Starting in 1996 Stelco elected
to “qualify” its Pension Plans and was thus exempted from making un-funded
liability payments with respect to any solvency deficiencies applicable to the
plans.
Regulation 5.1 was amended in
2002 so that employers are no longer allowed to take the “qualifying plan”
election. However, Stelco was grandfathered in and allowed to retain
“qualifying plan” status and continues to make no solvency deficiency payments.
The result is that the pension plans continue to deteriorate financially until
they are now at the point that there are insufficient assets to pay for the
full pensions of the plan members.
We are asking for help for
our pensioners because without it there will be serious consequences for the
pensioners and their spouses. There will also be a large negative economic
impact and an increase in demand on social services.
We feel that the Ontario
Provincial Government is culpable in the current crisis affecting pensioners
and pension plans for the following reasons.
To
assist with
the current Stelco Pensioner problem we are making the following requests of
the Ontario Provincial Government.
·
Set up a special fund to ensure 100% of our pensions and benefits.
·
Make changes to the PBGF to allow for inflation since 1980, when the
maximum payout was set at $1000, and continue to have this indexed.
·
Increase the funds in the PBGF to cover its current under-funding.
·
Ensure that pension funding requirements are 100% of the wind-up
solvency calculation.
·
Recommend to the Federal Government that the CCAA be amended to provide
protection for retirees.
We feel that the Canadian
Federal Government has some culpability in the current crisis affecting Stelco
pensioners for the following reasons.
·
The Federal Government has failed to modernize the Companies Creditors
Arrangement Act (CCAA) and thus the disposition of pensions and benefits is
left up to the company and the CCAA judge. Also pensioners, who are the most
vulnerable people, have no protection in the CCAA process.
·
The Federal Government has failed to provide a Pension Benefits
Guarantee Fund for shortfalls in private pension plans.
·
The Income Tax Act limits the amount of contributions to plans with
excess surplus funds in private pension plans thus rendering the plans
vulnerable to under-funding.
·
The Federal Government severely restricts RRSP contributions for those
participating in defined benefit pension plans.
We
are recommending that the Federal Government take the following actions to assist
Stelco pensioners.
·
Provide assistance to Stelco retirees the same way that assistance was
provided to Algoma Steel Company
including a loan guarantee.
·
Amend the CCAA to provide protection to Pensioners.
·
Establish a national Pension Benefits Guarantee Fund to provide
protection to retirees from pension shortfalls.
·
Increase the limits on RRSP contributions for members of defined benefit
plans.
·
Assist the Province of Ontario in these matters using the Employment
Insurance generated budget surplus of $44 billion (announced February 11,
2004).
·
Use Employment Insurance in the form of a bridge to allow for workforce
downsizing so it does not place an extra burden on pension plans.
·
Treat Stelco equal to the Auto Sector pledge of assistance as a means of
preserving a strong and integrated Industrial Manufacturing base in Ontario.
We feel that the
Municipalities in which Stelco operates have a major stake in the insolvency
and restructuring crisis facing this large industrial manufacturer. In addition
to the thousands of pensioners whose reduced spending power will have a
negative economic impact, there are a large number who will lose employment and
cease paying taxes along with Stelco should it fail. Along with them will go the spin-off businesses and their
employees, and there will be a very large demand on Municipal Social Services.
The Economic Impact Report by
Datametrics Co. dated March 4, 2004 quantifies the effects of a Stelco failure
based on its study in February, 2004. They state that the loss of direct jobs
would be 5800 with a corresponding $417 million loss in wages. They also state
that indirect job and wage loss would be 12,300 and $970 million respectively.
This is a total of 18,100 jobs with $1.4 billion in wages removed from the
economy of Southern Ontario. They have
estimated the loss of taxes paid to Municipalities is $50 million in addition
to the Provincial loss of $350 million and Federal loss of $500 million.
We feel that Municipalities
should play a role in the Stelco restructuring and thereby protect their
economic base.
We recommend that Municipal Governments
and their representatives take the following actions to assist Stelco, its
employees and pensioners.
·
Request the Provincial Government increase the PBGF monetary balance to
cover its current under-funding.